WalletHub’s 10 For ’17: Financial Resolutions For The New Year
4:05 AMPosted by: John S Kiernan
Embed on your website<a href="http://ift.tt/2gXsbMn; <img src="//d2e70e9yced57e.cloudfront.net/wallethub/posts/30463/financial-new-years-resolution-2017.jpg" width="700" height="1301" alt="Financial-New-Years-Resolution-2017" /> </a> <div style="width:700px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2i54YNv;The first of the year brings both the promise of new beginnings and the burden of self-improvement. Fueled by the nostalgia of the holidays and armed with a year’s worth of regrets, some 45% of Americans decide to make New Year’s resolutions each January, according to research from the University of Scranton. They are, it seems, taken by the spirit that led Benjamin Franklin to advise: “Be always at war with your vices, at peace with your neighbors, and let each New Year find you a better man.”
We all certainly have our fair share of vices, especially as they relate to money. So it’s unsurprising that financially themed promises for improvement tend to be among the most popular resolutions made each new year. However, the fact that only about 8% of resolution makers achieve their goals does not bode well for hopes of improved money management.
Neither historically low odds of success nor uncertainty about the best resolutions to make should discourage you from improving your financial habits, however. WalletHub’s editors have crafted the following list of the 10 Best Financial Resolutions for 2017, along with some helpful pointers for bringing them to fruition. The Ask The Experts section that follows also has some great insight on the psychology of resolution season and advice on overcoming its day-to-day challenges. So check it all out, and get ready to make 2017 a great year for your wallet.
10 Resolutions for 2017- Thoroughly Review Your Credit Report & Sign Up for Credit Monitoring
Thanks to the increased availability of free credit scores, most people have a good sense of their credit standing these days. Too few of us are familiar with the contents of our credit reports, however, perhaps because we assume our credit scores tell the full story. But such thinking is flawed. For starters, as many as one in four people have a credit report containing an error that could affect their credit score, according to research by the Federal Trade Commission. Furthermore, reviewing at least one of your major credit reports on a regular basis will enable you to spot signs of fraud before they get too serious. You can start by checking your free TransUnion credit report on WalletHub.
With that being said, no one can keep tabs on their credit around the clock. And that’s where 24/7 credit monitoring comes in. Signing up for free credit monitoring will enable you to receive an instant notification anytime there is an important change to your credit report. In other words, it reduces your reaction time for issues and gives you the peace of mind that comes with knowing you won’t miss anything.
- Pay Bills Right After Receiving Your Paycheck
Taking care of monthly obligations before allowing yourself to indulge in any luxury expenses is a helpful budgeting strategy, giving you a better sense of what you can truly afford and what you can’t. It also helps you avoid ever having a late payment reported to the major credit bureaus, which is one of the easiest ways to damage your credit score.
The best way to ensure success is to set up automatic monthly payments from a deposit account. This will add discipline to the process without you having to think about it. To learn more about keeping your payment train on schedule, check out our 8 Tips For Never Missing A Due Date.
- Repay 20% of Your Credit Card Debt
The combination of a 0% balance transfer credit card and a well-crafted payment plan can help folks with at least “fair” credit save hundreds on finance charges while getting out of debt months sooner than they would otherwise. But considering that the average household with credit card debt will owe approximately $8,400 by the end of 2016, it will be difficult to reach debt freedom in one fell swoop. So we recommend starting smaller, by making a plan to transfer and pay off 20% of what you owe over the course of 2017.
That would amount to about $1,680 for the average household, requiring monthly payments of $140 with a card offering 0% on transfers for at least 12 months. But you can use a credit card payoff calculator to crunch the numbers in your situation. And if you can afford higher payments, by all means make them. The sooner you can pay off what you owe, the better off your wallet will be.
- Use Different Credit Cards for Everyday Purchases & Another for Debt
The Island Approach involves isolating unique financial needs on separate financial accounts, as if they are a chain of islands. The most basic application of this strategy is using a rewards credit card for everyday purchases that you can repay in full by the end of the month and a 0% APR card for revolving debt.
Doing so enables you to get the best possible terms on each card rather than settling for average terms on a single card. It will also help you reduce the cost of your debt, considering everyday purchases won’t be inflating your average daily balance. And if you ever incur interest on your everyday card, you’ll know you spent too much that month.
- Add One Month’s Pay to Your Emergency Fund
Roughly 54% of Americans do not have a rainy day fund, according to the Financial Industry Regulatory Authority. Like someone without insurance, folks who lack an emergency fund are merely tempting fate and putting themselves at risk of financial catastrophe in the event of prolonged unemployment or significant emergency expenses. Building up some monetary reserves should therefore be one of the first orders of business for any financial makeover.
While we recommend ultimately building a fund with about 12 to 18 months’ take-home income, it’s important to understand that won’t happen overnight. As a result, you needn’t put the rest of your financial life on hold until your emergency fund is complete, but rather chip away at it over time. That’s key because we actually recommend creating a six-month safety net before even beginning to pay down your debts in earnest. Doing so will help ensure that you do not end up right back where you started upon finally reaching debt freedom.
“Just as you might dress for success, spend for failure,” said Scott C. Hammond, a clinical professor of management at Utah State University. “Assume you will go 6 to 12 months every ten years without a pay check. Save accordingly. Live on a budget. Store a little food. Have a solid savings account with liquid assets.”
- Improve Your Credit Score by 20 Points
Less than 1% of people have perfect credit scores, which means nearly all of us have room for improvement. And 20 points is an amount by which pretty much everyone can improve their scores, regardless of the starting point. Furthermore, credit-score improvement in turn has the potential to save us quite a lot of money, on everything from loans and lines of credit to insurance premiums and apartment rentals.
The first step in the credit-improvement process should be to get your free credit report and review it for errors. Once you’ve confirmed that everything is accurate, you can begin shoring up the weak points in your score. The grades on the Credit Analysis section of your WalletHub account will tell you what those weaknesses are.
- Get an A in WalletLiteracy
Financial literacy levels in this country are far too low. In fact, only 57% of U.S. adults are financially literate, according to a 2016 survey by Standard & Poor’s. That leaves us tied with Switzerland for 14th in the world, behind the likes of Canada, the United Kingdom and Singapore – just to name a few. What’s more, roughly 45% of Americans grade their financial know-how at a C or below, according to the National Foundation for Credit Counseling.
This is important not only as it relates to our own finances, but also in terms of how our children will manage money in adulthood. Because children learn by example, how you handle money will serve as the foundation for their future relationship with finance.
So start 2017 by taking our WalletLiteracy Quiz and getting a baseline score. Then, throughout the year, study the areas where you struggled and periodically re-test yourself to gauge your progress. Your goal should be to get at least an A- by the time 2018 rolls around.
- Focus on Your Physical Health
There is a clear connection between physical, emotional and financial health. For starters, the average person spends about $4,342 on health care each year, which represents nearly 8% of his or her total annual expenditures. Money is also our biggest sources of stress, according to the American Psychological Association. And people who get regular exercise tend to have better credit scores.
This simply underscores the importance of not only getting your financial house in order, but also exercising regularly and engaging in other healthy practices aimed at reducing healthcare costs. It won’t be easy, but this is one resolution that will certainly pay dividends in multiple areas of your life.
“If you begin to make small healthy changes to your diet, increase exercise in small increments, and practice yoga and meditation, you will feel better,” says Deborah Bauer, a distinguished senior instructor of finance at the University of Oregon. “Feeling better will lead to wiser financial decisions that focus on the long term.”
- Make a Realistic Budget & Stick to It
The fact that we’re on pace to rack up roughly $80 billion new credit card debt during 2016 is perhaps a bit less surprising when you consider that only about 40% of adults have a budget, according to the National Foundation for Credit Counseling. But both statistics also signal the need for greater urgency on our part.
The best way to make a budget is to gather your bills from the past few months and make a list of all your recurring expenses. Then rank them in order of importance, with true necessities such as housing, food and health care obviously taking the top spots. After that, you can simply cut from the bottom of your list until your take-home exceeds what you plan to spend. Finally, keep track of your ensuing monthly spending to make sure you’re abiding by your budget.
- Look for a Better Job
Sometimes, we get so caught up in spending less and saving more that we forget to address the other side of the equation: how much we actually earn. But the benefits of finding a better-paying job could actually end up outweighing all your other financial maneuvering put together. Trading up career-wise isn’t necessarily as simple as scouring local job postings, however. Rather, you might need to consider moving in search of higher wages or a lower cost of living. Or you could go back to school to acquire skills that will add to your earning potential.
Not all industries and areas of the country offer the same opportunities, after all. For example, the best city for job seekers in 2016 – Plano, TX, according to WalletHub research – has more than one job opening per unemployed resident and an average monthly starting salary of $3,016. Meanwhile, the worst city for jobseekers – Stockton, CA – has just one opening for every five unemployed residents and a monthly starting salary of $2,270.
We turned to a panel of leading experts in the fields of personal finance, business, management and psychology for additional insight into the best New Year’s Resolutions for achieving financial improvement and strategies for sticking to them. You can check out our experts’ bios as well as the questions we asked them and their responses below.
- What are the Do’s and Don'ts of New Year's resolution-making?
- To what extent does a solid support system make it easier to stick to resolutions? Is it a good idea to have a resolution buddy
- Does rewarding positive behavior make it easier to accomplish a long-term goal? Are certain types of incentives better than others?
- What is the ideal number of resolutions?
- Todd Carothers Assistant Professor of Business Administration at University of Wisconsin-Platteville
- Linda Simpson Professor and Chair of the School of Family and Consumer Sciences, and Executive Director of the Literacy in Financial Education Center at Eastern Illinois University
- Juan Carlos Martinez Professor of Economics at Richland College
- Terrance Odean Rudd Family Foundation Professor of Finance in the Haas School of Business at University of California, Berkeley
- Martha Frost Professor and Chair of the Department of Human Development and Family Relations at SUNY Plattsburgh
- David Hirshleifer Professor of Finance and Merage Chair in Business Growth in the Paul Merage School of Business at University of California, Irvine
- Jeffrey Dew Associate Professor in the Department of Family, Consumer, and Human Development at Utah State University
- Terrance Martin Assistant Professor of Finance in the Department of Economics and Finance at University of Texas Rio Grande Valley
- R. Pete Parcells Associate Professor of Economics at Whitman College
- John Hilston Professor of Economics at Eastern Florida State College
- T. Clifton Green Associate Professor of Finance at Emory University, Goizueta Business School
- Robert Nathan Mayer Professor of Family and Consumer Studies at University of Utah
- Catherine A. Solheim Associate Professor of Family Social Science at University of Minnesota
- To pay themselves first, contributing the maximum allowable amount to their 401(k) accounts and by beefing up their emergency funds (equalling six months of income);
- To reduce/eliminate credit card debt with a New Year’s resolution; to repay the balance in full at the end of each month.
- By observing fiscally responsible habits themselves, and by encouraging fiscal responsibility among their constituents;
- By supporting legislation requiring balanced budgets at the local, state, and federal levels.
- By developing the savings habit by taking small, realistic steps toward saving, gradually increasing the percentage set aside;
- By recording and tracking savings contributions; actually seeing the results of one’s savings efforts will reinforce the savings habit.
- By developing SMART resolutions, e.g., Specific, Measurable, Attainable, Realistic, and Time-sensitive goals;
- By taking small, realistic steps (to build confidence) for reducing one’s debt.
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